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World Oil Market Outlook in Year 2019

Dr.Masih Rezvani

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World Oil Market Outlook in Year 2019
There is no peace in the oil . 
During the three months from October to December at last year, North Sea Brent oil prices fell 40%  down from $86 to $ 50, and then, in just two weeks, on the eleventh day of the New Year , move up to $61.
 Such sharp fluctuations indicative of significant developments awaiting the international economy in particular in the global oil market
These fluctuations first raised questions about the reasons for the oil price rise , and then another important question about the prospects for the global "black gold" market in the coming months.

*Game  with the price of oil
The various factors affecting on the move up&down  of oil prices can be summarized as follows:
One) Following the US decision to withdraw from (BIRJ), President Donald Trump promised to impose the toughest sanctions in history against to Iran. 
The most important focus of these sanctions, he said, was to reduce the Iran's oil exports to zero.
 As the second wave of US sanctions against Iran approaches, and the prospect of its withdrawal from export markets, Saudi Arabia has been encouraging or under pressure from Washington to increase its oil production in order to avoid uncontrolled tensions in the market. Russia also increased its exports to take advantage of the situation.
But the scenario of Iran's removal from the world oil market, as announced by Donald Trump, was not implemented.
Shortly after the second wave of sanctions, the US president without informing to Saudi Arabia allowed to 8 countries to continue buying oil from Iran for up to six months. 
Under these circumstances, the supply of oil to the world markets increased significantly, especially as small oil producers in the USA  increased their supply.
 On the other hand, the international economy has also faced new ambiguities, notably the trade war between China and the United States and the danger of slowing global economic growth rates, which exacerbated the likelihood of falling oil demand and thus price.
The result of these factors led to a 40% drop in oil prices in the last quarter of last year.

*The months ahead 
The developments of the world oil market in the coming months depend on the following factors:
A) Saudi Arabia, as mentioned, does not hide that if necessary it will reduce its output again to balance oil supply and demand. It is not easy to do it , simply because the decline in Saudi exports could lead its traditional oil customers to its rivals, including Iraq or even Russia.
On the other hand, Saudi Arabia's radical oil policy may trigger a backlash from Washington, especially as Americans have more opportunities to exert pressure on Riyadh following the assassination of Gamal Khashoghchi.
B) The fate of Iran's oil and the real volume of its exports under pressure from US sanctions is a big question mark.
The licenses granted by Washington to eight Iranian oil-importing countries expire in May, and US officials have ruled out extending them. The question then arises: how much oil will Iran eventually export to world markets?
Prior to the recent midterm congressional elections, Donald Trump strongly warned OPEC and Saudi Arabia about the danger of rising oil prices. American consumers (people and companies) are very sensitive to the price of oil, and it can even be said that theoil in  US has a very high level of political sensitivity.
All these variables must be taken into account when evaluating the future developments of the world oil market.
This means that it is difficult to predict the average price of a oil in 2019.
Dr.Masih Rezvani

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SK

(edited)

The oil price drop to $50 last October 2018 thru Jan 2019 and subsequent rebound has nothing to do with your reasoning.  

ALL that price action was the algorithms from program trading where oil mirrored the S&P 500 index.  The correlation is obvious.

S&P dropped due to Fed action and shortly after oil folowrd tick by tick.

Edited by SKEP
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